Before jumping into the design of your hardware product, make sure you ask yourself these 5 questions:
A two-dimensional positioning map helps you visualize how buyers will perceive your planned product relative to their alternatives.
In doing so, it forces you to identify the most important dimensions of competitive differentiation, and to decide how you will compete. The example below, shows the 2D position map for wearable fitness devices.
Like Fitbit, if you plan to be first-to-market in a new category, you must consider how long you can sustain that position, and how you will be positioned relative to competition when it does invariably arrive. There are many competitive factors to consider, and pragmatism is important when considering the trade-offs between them:
- Price: Do you plan to offer a lower price than market alternatives, a higher price to reinforce a premium position, or the best value for money?
- Performance: Will your product’s performance be faster, stronger, or otherwise superior to that of alternative products?
- User experience (UX): Compared to alternative products, how will all aspects of user experience (ease-of use, ease-of-purchase, user enjoyment, task efficiency, etc.) be perceived? User experience is often overlooked, but is one of the most important potential competitive differentiators—just consider the success of Apple.
- Functionality: Will your feature set be broader or more advanced than that of alternatives?
- Design appeal: Buyers often make purchase decisions based on first impressions, even if they do not admit it. ‘Rational’ detailed product evaluations are usually biased to justify those initial decisions. Visual appeal, texture and feel, colour, and other subjective factors have a huge impact on how buyers select everything from consumer appliances to industrial equipment.
- Quality: How important is it that your product be perceived to have the fewest initial defects, to have the best fit and finish, and to work flawlessly?
- Reliability: Is it important that your product be perceived to last longer than the competition? What about its required level of maintenance and its expected failure rate?
- Service: After-sales service and support can be a major basis of competitive differentiation. How important is it to the success of your new product? Are there built-in product features that enable after-sales support?
Your in-house team may be consumed with other projects, or you may lack the specialized expertise required to address specific technical challenges. In the case of smart, connected products (i.e.Internet of Things - IoT) , you may need help architecting the overall solution and coordinating the work of multiple suppliers.
A key component of your new product development strategy is the definition of who will participate and how they will be managed. Your main options include:
- In-house: Project management and most of the product development execution is accomplished with your own people.
- Outsource: An external partner is engaged to design your product, manage the process, and source and coordinate the work of additional subcontractors and suppliers. Your people provide business oversight, identify requirements, and contribute feedback to the project.
- Hybrid: In some cases, it may make sense to manage the project in-house, coordinating the work of a design firm and one or more suppliers. Some products, such as IoT solutions, may require the coordination of many suppliers.
The largest risk associated with new product development is commercial failure. Cost overruns and delays are always painful, but they are soon forgotten if product sales take off.
Conversely, even if the development project is on-time, on-budget, and on-spec., the effort is wasted if sales fall flat. Consequently, it is crucial that throughout the product development process you seek validation of market demand, your value proposition, and your product’s feature set and design. Fortunately, you have many tools at your disposal.
The main strategies include:
- Crowdfunding: Depending on your product category, you may be able to use a popular crowdfunding platform, such as Kickstarter or Indiegogo, to promote your idea early in the development cycle, attract investment, and validate the appeal of your idea.
- Prototyping: You may be able to use prototypes at several stages of your development project to demonstrate your product idea, gain feedback, and even secure lead customers.
- Low-volume tooling: Production tooling and setup are major investments for hardware products. One option is to build less-expensive, short-life tooling for a low-volume production run of your product to support a market test.
- Full production:Your cost model may suggest that you proceed directly to high-volume tooling and a full scale production run. Hopefully you have received strong prior validation that your product will hit the mark.
That expands your range of possible business models (each with specific product feature requirements) and you need to consider your options:
- Subscriptions for data feeds, storage, or hosting
- Purchase, lease, or metered usage ($ per transaction) for hardware or application components
- ‘Freemium’ models: free basic functionality with paid upgrade opportunities
- Recurring revenue opportunities through consumables, maintenance, upgrades, and more
- Opportunities to increase user engagement and the network effect, exposing new users and prospective customers to your product
- Product portfolio overlap: If your new product provides capabilities that overlap with existing products, it may cannibalize sales rather than grow your overall revenue.
- Product roadmap: Almost all products evolve over time, with new features and capabilities periodically introduced. A lean strategy starts with a ‘Minimum Viable Product’ (MVP) and a draft roadmap of enhancements that evolves as you gain market feedback and sales validation.
- Product line refresh: You may have opportunities to reinvigorate sales of an existing product by improving its design appeal, boosting usability, or adding new features.
- Product portfolio expansion: As illustrated by Geoffrey Moore’s famous bowling alley analogy, there are two main directions for business expansion: develop new products for your existing customer segments, or adapt an existing product to new customer segments.
Geoffrey Moore's Famous Bowling Alley Marketing Development Analogy
Everything flows more smoothly—and with minimal risk—when you have a strategic development framework in place.